Q1. The world economy is globalizing at an accelerating pace.

Discuss
this statement and list the benefits of globalization.
Globalization is the process of international integration arising from the
interchange of world views, products, ideas, and other aspects of culture. Put
in simple terms, globalization refers to processes that increase world-wide
exchanges of national and cultural resources.
Advances in transportation and telecommunications infrastructure, including
the rise of the telegraph and its posterity the Internet, are major factors in
globalization, generating further interdependence of economic and cultural
activities. To begin with, globalization has contributed to the worlds
economy in many valuable ways.
Globalisation has brought in new opportunities to developing countries.
Greater access to developed country markets and technology transfer hold out
promise improved productivity and higher living standard. But globalisation
has also thrown up new challenges like growing inequality across and within
nations, volatility in financial market and environmental deteriorations.
Another negative aspect of globalisation is that a great majority of developing
countries remain removed from the process. Till the nineties the process of
globalisation of the Indian economy was constrained by the barriers to trade
and investment liberalisation of trade, investment and financial flows
initiated in the nineties has progressively lowered the barriers to competition
and hastened the pace of globalization.
The advances in science and technology have allowed businesses to easily
cross over territorial boundary lines. Accordingly, companies tend to become
more creative, competitive thus raising quality of goods, services and the
worlds living standard. Secondly, several companies from the more
developed countries have already venture to begin foreign operations or
branches to take benefit of the low cost of labor in the poorer countries. This
kind of business activity will provide more arrival of cash or asset funds into
the less developed countries. However, one cannot reject the harmful effects
which have resulting from globalization. One crucial social aspect is the risk
and danger of outbreak diseases which can easily be multiply as the mode
transportation is easier and faster in todays advance society. This is
evidenced in the recent birds flu disease which has infected most Asian

countries over a short time frame. As large corporations spend or take over
many off shore businesses, a modern form of immigration will also change
which may fake certain power force on the local governments of the less
developed countries.
Merits:
1. Imported goods are available
2. The country can produce what it produces best and import the rest
3. There is a feeling of an international economy
4. The local industries work hard to compete with international firms
5. Raw material is available
6. The standard of life becomes better
7. More jobs are created
8. There is security from famine, disease, etc as international firms intervene.

Q2. Compare the Adam Smith and David Ricardos theories of

international trade with examples.
In 1817, David Ricardo, an English political economist, contributed theory
of comparative advantage in his book 'Principles of Political Economy and
Taxation'. This theory of comparative advantage, also called comparative cost
theory, is regarded as the classical theory of international trade.
According to the classical theory of international trade, every country will
produce their commodities for the production of which it is most suited in
terms of its natural endowments climate quality of soil, means of transport,
capital, etc.
It will produce these commodities in excess of its own requirement and will
exchange the surplus with the imports of goods from other countries for the
production of which it is not well suited or which it cannot produce at all.
The principle of comparative advantage expressed in labour hours by the
following table.

Portugal requires less hours of labour for both wine and cloth. One unit of
wine in Portugal is produced with the help of 80 labour hours as above 120
labour hours required in England. In the case of cloth too, Portugal requires
less labour hours than England. From this it could be argued that there is no
need for trade as Portugal produces both commodities at a lower cost.

International trade, which is the idea that David Ricardo talks about, is a
bit more slippery, and its best explained in an example. Lets say that Annie
and Bonnie both have small gift shops in a small town where they both sell
their homemade soaps and their homemade candles. Annie can make a
homemade candle for fifty cents, but making a bar of soap costs her a dollar.
Meanwhile, Bonnie can make homemade soap for a quarter, but a candle
costs her a dollar to make. In other words, Annie is much more efficient at
making candles and Bonnie is much more efficient at making soap. If theyre
willing to trade Annie gives candles to Bonnie in exchange for soap
theyll both make substantially more profit that way. Thats comparative
advantage in a nutshell.

Q3. Regional integration is helping the countries in growing their trade.

Discuss this statement. Describe in brief the various types of regional
integrations.
Regional integration is vital to creating the infrastructure that
many poor countries are unable to build on their own: trade
corridors, transport networks, energy development, water
resources
management,
and
telecommunications
connectivity. Effective collaboration among countries can
meet the critical gaps in basic access and service delivery
that promote growth and development.
Various types of regional integrations:
Preferential Trade Agreement (PTA), which is formed with
the reduction of
custom duties (mainly tariffs) on trade among members
relative to those on trade with non-members.
Free Trade Area (FTA), which involves the elimination of
tariffs and quotas on the trade among member countries.
Customs Union (CU), which goes a step further than the
FTA as in addition to free trade within the union, there is a
common external tariff (CET) against nonmembers.
Common Market (CM), which is a CU that allows for the free
movement of factors of production among member
countries. Thus, it encompasses intra-union free trade, a
common external tariff against non-member countries and
free movement of factors of production (labour and capital)
within the union. Economic and Monetary Union (EMU),
which is a common market in which there is a single
currency and monetary policy, and in which major

economic
policies
(particularly
coordinated or harmonized.

fiscal

policy)

are

Q4. Write short note on:

a) GATS (General Agreement on trade in services)
b) ILO (International Labour organization)
a) GATS (General Agreement on trade in services)
The General Agreement on Trade in Services (GATS) is a
treaty of the World Trade Organization (WTO) that entered
into force in January 1995 as a result of the Uruguay Round
negotiations. The treaty was created to extend the
multilateral trading system to service sector, in the same way
the General Agreement on Tariffs and Trade (GATT) provides
such a system for merchandise trade.
All members of the WTO are signatories to the GATS. The
basic WTO principle of most favoured nation (MFN) applies to
GATS as well. However, upon accession, Members may
introduce temporary exemptions to this rule.

b) ILO (International Labour organization)

Underlying the ILOs work is the importance of cooperation
between governments and employers and workers
organizations in fostering social and economic progress.
The ILO aims to ensure that it serves the needs of working
women and men by bringing together governments,

employers and workers to set labour standards, develop

policies and devise programmes. The very structure of the
ILO, where workers and employers together have an equal
voice with governments in its deliberations, shows

Q5. What is the difference between domestic and international

accounting and how will you measure this difference
INTERNATIONAL ACCOUNTING is the international aspects of
accounting, including such matters as accounting principles and reporting
practices in different countries and their classification; patterns of accounting
development; international and regional harmonization, foreign currency
translation; foreign exchange risk; international comparisons of consolidation
accounting and inflation accounting; accounting in developing countries;
accounting in communist countries; performance evaluation of foreign
subsidiaries.
Measurement of differences between IAS and DAS:
Literature on international accounting differences
Various data sources have been used to measure international accounting
differences in prior literature. Most of the prior studies interpret international
accounting differences as different options adopted by different nations for
the same accounting issues, which corresponds to our divergence concept.
Framework of analysis
Prior studies have established some links between differences in accounting
standards across countries and financial reporting quality. In a widely cited
study, find that differences in countries accounting standards affect the in
formativeness of reported financial information. The effect of institutional
factors on the financial reporting quality has also been studied

Measurement of absence and divergence

One of the contributions of this study is that we construct a measure of
differences national GAAP and IAS based on the survey GAAP 2001: A
Survey of National Accounting Rules Benchmarked against International
Accounting Standards. This survey was published jointly by seven large
audit firms: Andersen, BDO, Deloitte Touche Tohmatsu, Ernst & Young,
Grant Thornton, KPMG and PricewaterhouseCoopers.
Q6. Discuss the various payment terms in international trade. Which is
the safest method and why?
There are many ways to make and receive payment in international trade.
Due to the physical distances between buyer and seller, and the fact that the
transaction may have taken place without the two parties actually meeting,
minimizing exposure to risk is on the minds of both parties. The buyer wants
to make sure they receive their order in acceptable condition and on time, and
the seller needs to know they will get paid for it. Below is a table of the most
popular payment methods for trade, according to Alibaba.com member
research:
TT or Cash Advance
T/T is the easiest payment from and is typically used when samples or small
quantity shipments are transported by air. T/T is also used between buyers
and sellers who have already established a mutual trust, as this negates the
risks associated with this, the fastest and cheapest form of payment.
Documents like air waybills, commercial invoices and packing lists will be
sent to you along with the shipment in the same aircraft. As soon as the
shipment arrives, you, with documentation, can clear the customs and pick up
the goods.
Shipping happens only after money is safely in seller's. It usually takes 3-4
days for such a wire transfer anywhere in the world.
Letter of Credit (L/C)

The L/C is a guarantee, given by the buyer's bank, that they will pay for the
goods exported, provided that the exporter can provide a given set of
documents in accordance with clauses specified in the L/C and in a timely
manner.
The technical term for letter of credit is "Documentary Credit."Letters of
credit deal in documents, not goods. Thus, the process works both in favor of
both the buyer and the seller.
Simply put, a letter of credit is a letter written by the importer's bank to the
exporter. It verifies that the payment will be guaranteed when the bank is
presented with concrete documents (bills of lading and freight documents).
Most letters of credit are "irrevocable" once the importer has had them sent,
which means it cannot be changed unless both the buyer and seller agree.

Document Against Payment/Bill of Exchange

The exporter ships the goods, and then gives the documents (including the
bill of lading necessary to claim the goods at the foreign port) to his bank,
which will forward them to a bank in the buyer's country, along with
instructions on how to collect the money from the buyer.
When the foreign bank receives the documents, they will contact the buyer
and provide documents to the buyer only when the buyer pays.
Open Account
Opposite situation to T/T: The exporter receives payment only after the buyer
has received and inspected the goods.